Property of the NK-4 homeodomain protein as a transcription factor was characterized both in cultured cells and in transgenic animals. NK-4 can act either as a transcriptional activator or a repressor, which was revealed by domain analysis of NK-4 and transcription assays with target genes. Novel function of the homeodomain as a repressor domain which also serve as protein-protein interaction domain was identified. Mutational analysis of NK-4 homeodomain showed that DNA binding is not required for its repressor function. Instead, helix I region of the homeodomain is important for its function as a repressor domain. In vivo, in collaboration with Twist, NK-4 regulates its own gene in visceral mesodermal cells. Also, NK-4 activates D-mef2 gene in cardial cells, which define the first known in vivo target for transcriptional activation by NK-4, demonstrating that D-mef2 lies directly downstream of NK-4 (tinman) in the genetic cascade controlling heart formation in Drosophila. Transgenic flies harboring gene cassettes that produce dicistronic mRNAs for both various NK-4 domains and green fluorescent protein (GFP) were generated so that cells expressing NK-4 (or NK-3) ectopically can be monitored by GFP fluorescent when crossed with GAL4 transactivator producing lines. Transgenic lines harboring the GAL4 gene under the control of the D-mef2 cardial enhancer were also generated in order to express target genes (NK-4 or NK-3) in a tissue- specific manner. Using these transgenic lines, investigations of the effect of ectopic expression of NK-3 and mutant NK-4 proteins in cardial cells on cardial cell differentiation are under way by whole-mount in situ hybridization and immunostaining of embryos with cardiac-specific antibodies.